Other Voices: Ikos's Elena Ambrosiadou asks: "Has anyone learnt anything from the recent Cyprus maelstrom, and will it make a difference?"

Cyprus is in the middle of a financial maelstrom - where did it come from and what needs to be done about it now? Cyprus is the third smallest Euro area economy (0.2% of Euro area GDP). The total debt to GDP ratio reached 90% as of 2012, rising from 60% during the last presidency. The country joined the Euro in January 2008. The Russian business community which is well established in Mon-aco, the UK, and Cyprus has contributed to the total level of foreign deposits in the region. 30-45% of total bank deposits in Cyprus are held by non-Cypriot residents including Greek residents and 80% of those are non-EU. The high level of deposits was exploited by the banks and the Cypriot private sector became one of the most leveraged in Europe with a ratio of 130% household loans-to-GDP as recorded by the end 2011. The financial services sector grew to correspond to 40% of the country’s GDP, contributing €8 billion to the national budget.

Over time, the Central Bank of Cyprus and the Cyprus Securities and Exchange Commission have applied stringent capital adequacy rules to banks and Cyprus Investment Firms (recently tightened further in line with EU regulations). Given these measures, how was it possible to overextend with such dire consequences?

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